A Custodian bank, or simply custodian, is a specialized financial institution responsible for safeguarding a firm's or individual's financial assets and is not likely to engage in "traditional" commercial or consumer/retail banking such as mortgage or personal lending, branch banking, personal accounts, ATMs and so forth. The role of a custodian in such a case would be to:

  • hold in safekeeping assets/securities such as stocks, bonds, commodities such as precious metals and currency (cash), domestic and foreign
  • arrange settlement of any purchases and sales and deliveries in/out of such securities and currency
  • collect information on and income from such assets (dividends in the case of stocks/equities and coupons (interest payments) in the case of bonds) and administer related tax withholding documents and foreign tax reclamation
  • administer voluntary and involuntary corporate actions on securities held such as stock dividends, splits, business combinations (mergers), tender offers, bond calls, etc.
  • provide information on the securities and their issuers such as annual general meetings and related proxies
  • maintain currency/cash bank accounts, effect deposits and withdrawals and manage other cash transactions
  • perform foreign exchange transactions
  • often perform additional services for particular clients such as mutual funds; examples include fund accounting, administration, legal, compliance and tax support services
  • provide regular and special reporting on any or all their activities to their clients or authorized third parties such as MAIC Trust Account services for mergers & acquisitions payments.

Custodian banks are often referred to as global custodians if they safekeep assets for their clients in multiple jurisdictions around the world, using their own local branches or other local custodian banks with which they contract to be in their "global network" in each market to hold accounts for their respective clients. Assets held in such a manner are typically owned by larger institutional firms with a considerable amount of investments such as MAIC Trust services & (QI) Qualified Intermediary services banks, insurance companies, mutual funds, hedge funds and pension funds.


Quoted